Action construction equipment ltd

				Action Construction Ltd
                 		         Highlights of Q3 FY18 Concall

Financial Performance

  • Q3FY18
    o Sales increase by 48 % to Rs 279 Cr compare to last year same quarter
    o PBT increase by 264 % to Rs 22.4 Cr compare to last year same quarter
    o PAT increase by 236 % to Rs 16.41 Cr compare to last year same quarter
  • Key Highlights
    o Cranes business increase by around 70 % on YOY basis
    o In Construction equipment business road machinery business increase by about 57 %
    o In material handling segment , forklift business increase by 46 % and 3 % increase by agri side

Q&A

  • Is there a change in mix of business ? What kind of order backlog will be there which will give growth in FY19 ?
    o Company is going to increase profitability and profit percentages . In current quarter there is some pressure because of steel prices but company will able to handle it because in February company is going to increase prices of products.
    o Company is looking for a 50 % growth in order compare to October , November and December. Currently company is coping up with manufacturing side to immediate ramp up the production plans.

  • Is the current growth is sustainable on yearly basis ?
    o Yes , company will is expecting atleast growth will be sustainable as it is in Q4. 60-70 % of company revenue is indirectly connected to infra sector . balance is connected to hardcore industry and manufacturing and company is seeing a big revival in that .

  • Why is the agri equipment growth so soft and what is the progress company have made in backhoe loader segment?
    o In the agri side company is planning to grow 15-20 % in current year. In last quarter company had done 57 % increase in top line on a YOY basis with respect to backhoe loader. Company will able to grow 70-80 % in seeding machines throughout the country which has been happening in the last one and a half year on a continued basis, including company board machinery

  • With every addition of 5 % in utilisation , How much could it affect top line and bottom line ?
    o 5% increase in utilization would be approximately Rs. 70- 75 crores of revenue.
    o In construction equipment and forklift and agri company utilisation will increase more than 10 %
    o Company have enough capacity to overall reach the turnover of around Rs. 1,500 crores - Rs. 1,600 crores. For about every 100 Cr increase un revenue will increase PBT about 15-16 % that is about 15-16 Cr

  • What is the current capacity utilization ?
    o In cranes it is 60 % utilization , Construction equipment is at 30 % utilization, Material handling is at 50 % utilization and Agri is at 50 % utilization. Company have capacity to get double from current level. but yes doing a Rs. 1500 crores - Rs. 1600 crores revenue out of this existing capacity in the next year should be very easy

  • Does company looking at capacity utilisation increase at the rate of 10% in all areas?
    o No , company is looking at slightly higher than that . Because in Q4 company is looking at a 40-50 % growth on YOY basis . Going forward in next year also company is looking at a 25-30 % growth. So company will be utilising 60-70 % of capacities

  • What were the volumes in the quarter ?
    o For pick and carry company had done 1216 units, for mobile tower cranes and tower cranes put together company had done about 64 units, for tractors company had done about 1024 units and for forklifts company had done 215 units

  • How is now company presence in terms of markets ?
    o Company presence is predominantly in Haryana , UP and some other parts of North India. But in the last one and half year company had increase its distribution focus in the eastern, southern and western parts of the country. Apart from that company had also developed bigger horsepower tractor, 75 horsepower and 90 horsepower tractor especially for the export market. Company had put a export division in place six months back . So in the next year company will be exporting these bigger horsepower tractors especially to Africa in reasonable numbers.

  • How will the tie up with PNB for selling farm equipment looks like?
    o It was done to increase sales number of tractors and harvesters because 90% - 95% of agri machinery is sold on credit and PNB being one of the leading banks and available more or less in every nook and corner of the country. So this a big shot to increase tractor sales in times to come.
    o In coming days, company will be a part of TMA , Tractors Manufactures Association of India. All the leading finance companies, especially the private companies mainly are focused towards TMA members with respect to funding of agri machinery. So going forward, even the private financers are supposed to handhold us with respect to the credit they offer in the market for financing. This should really help company in increasing numbers next year.

  • How much growth company is seeing in different sectors and what is the focus on budget outlook over the next coming years?
    o In Q4 company is looking for a growth of 40 % on YOY basis. After that for the next year again doing a 25% to 30% growth should not be a problem because company had projected 18-20 % growth in FY18 but now company itself has grown 40 % . So realistically 25% to 30% should be easily done. With respect to budget company is hopeful because infrastructure , industrial activity and agricultural are the three main focus which as of now the Finance Ministry has and luckily company is working of all of these three domains

  • Is the growth is across whole industry or just in the company ?
    o With respect to cranes company is growing faster then competition . In backhoe loaders or forklifts whole industry is growing because things are back on track . More or less other companies are growing in similar numbers

  • What will be the peak margins at peak utilisation level ?
    o On EBITDA it can be 10-13 % or may be slightly more . PBT above 10 % . Tax rate currently it around 25%, so let’s say 13% odd plus/minus at EBITDA level. Little more than 10% on PBT level and somewhere around 7.5% - 8% on PAT level

  • What is the company market share in various segments ?
    o In cranes it is close to 64 % and it has gone up by 2-3 % in the last quarter.
    o In Material Handling company would be close to 20 % market share .
    o In construction equipment and agri equipment company market share is miniscule

  • Does company have any additional manpower and sources of production which will aid this growth so does company ramped up on those aspects ?
    o Yes company is pre-planning with respect to whatever need to done . Company at it own end is well equipped to cater the increase in demand . The second side is supplier base . In the last two month company have already started working out alternate plans where company can use capacities with somebody else who are not supplying to company .

  • Is there any CAPEX plan for FY20 ?
    o From current land bank company is only using 30-40 % of total so land is readily available with company

  • Why company is able to gain market share compare to competitors ?
    o Company sell good cranes at the right price, backed by even better warranty and service support. This is the simple strategy .

  • Why promotor has sold stake in current quarter ?
    o In November promotor family sold around 50 lakh shares. Many marquee and big global investors were continuously in touch with company and they wanted to be a part of company or part of a growth story. But somehow it was difficult because of liquidity in the market is quite restricted . So promotors decided to give away a small portion . From 73% promoter holding went down to 69%.

  • What is the lead time that company take from getting the order and the same getting reflected in the results?
    o Company have four segments and company biggest segment is Cranes . Company continuously producing Cranes and company have a in-house order tracking system where company know the number of fresh orders which are coming in a day and what needs to be produced. So company is working on a 12 day cycle from order to delivery .
    o Company had recently hired a consultant to further work on supply chain to further de-stress it and make it even better so that delivery lead time get reduce. In next 3-4 month company will further debottlenecking respect to supply chain.

  • Give some brief on the long term debt that has increased from Rs 30 Cr to Rs 83 Cr and also on increase of short term borrowing by Rs 56 Cr ?
    o Company have been using working capital and CC limit which take from bank . Even company utilisation was not in sync with it , because company earlier CAPEX which company had done in 2011-12 , 2012-13 was from working capital only. So to balance right company had taken 25 Cr of loan from Kotak . With respect to inventory, debtors and creditors company will reach at level of 80 Cr and 85 Cr with respect to total debt , including long term and short term.
    o So it is basically a shift from short term loan to long term loan

  • Kindly give YOY comparison in terms of capacity utilization for the agricultural segment?
    o It is similar as of now because the growth that company has shown in the last quarter in only about 3 % more as compared to FY17. And company is working at about 50 % with respect to agri

  • Is there was no price hikes given the steel price movements?
    o No , company is pushing price as of now . In month of august company were pushing price increase of about 2.5 to 3 %. Specifically in January, steel prices along with other commodity prices have increased drastically. So from February onwards company intend to push in a price hike of around 3% - 3.5% which will take shape only by March and April. But in the meantime a lot of material is in pipeline, so generally company will be able to drag price increase with respect to incoming material as well as finished goods

  • How much of revenue or it is completely driven by incremental unit sales as opposed to any revenue from the source of leasing or servicing?
    o Most of it would be from sale of new units . Company have its rental and leasing business which has practically not grown further in the last 12 months owning to the overall market scenario. But yes, going forward the rental business is going to increase and going to increase quite a lot. It is just that in a tight market scenario company don’t want to increase its rental business in hands of bad pay masters because even the biggest of companies have been really bad pay masters in the last one or two years. So that was primarily the reason. But yes, going forward company is much focused and company rental business will increase 6-7 times in the next one or two years

  • Given the lowering of interest rates by RBI, does company had thought about refinancing at a more optimal cost of capital or even raising capital through some transfigurative issues?
    o Company interest cost is close to about Rs 13.6 Cr last year and hopefully company will be finish at something similar . Company is enjoying one of the best rates available in the market with respect to financing cost .

  • What will be the maintenance CAPEX YOY ?
    o 8-10 Cr

  • How much is the rental business currently ?
    o Company had done 15 Cr in first 9 months . In last year company had about 18 Cr . In this year it will be around 20 Cr . But it will increase 6-7 times in next couple of years

  • If there any interest from FII to have stake in company ?
    o Yes there has been a lot of interest in last 6-9 months . Some of them are really good and marquees investors from India and abroad. Bringing down promoter stake from73% to 69% was a very big decision. Promoters will not reduce stake further

  • Which are the end sectors which are driving this cranes growth ?
    o For the cranes segment about 60% of our growth is broadly with respect to infra and construction activity and 40% is hardcore manufacturing, industry & engineering sectors. Primarily the demand for cranes as of now in the infra sector is being driven by railways, metro, urban infra or the highway jobs, and refineries . With respect to industrial activity across all sub segments Steel is the biggest consumer for cranes, so obviously steel is taking the lead in the industrial side because more the movement of steel happens, obviously more cranes needed to move them , lift them, shift them, load them, unload them, and place them.
    o About 8-10 % of company crane portfolio also consists of housing and civil structures and real-estate where company supply tower cranes which has been reasonably slow in 2013, 2014, 2015, 2016 and even in 2017. But definitely in the last four five months of 2017 and going forward company is seeing good attraction even in the tower crane segment which is primarily for civil construction. Leaving out NCR, Delhi, Gurgaon, Noida and Faridabad, all other major cities are already seeing a revival in demand with respect to tower cranes for building construction . NCR will also catch up. But the biggest traction is coming from this so called low cost housing activity in Gujarat and Madhya Pradesh

  • Does company will introduce new models in the in the construction equipment segment? Does company products are comparable with the market leaders in terms of range or company is likely to expand further ?
    o With respect to construction equipment company have backhoe loaders and three to four different types of vibratory rollers which are used for road construction, whether it is soil or whether it is asphalt. Going forward with respect to motor grader company is going to add a model which is a slightly smaller model for the rural roads or the hilly roads where there is a need of smaller machine. In month of march company would be launching new models of backhoe loader , which will further upgraded with better aesthetics and certain specification feature which might be better than competition as well. With this company will have a sizeable market share in backhoe loader market. Company is also thinking on track excavator segment wherein companies like Hyundai, Hitachi, Kobelco or Komatsu are currently present

  • Will this construction equipment margins or the profitability of this product will be on par with cranes or will be slightly above ?
    o It will be similar in respect of profitability , company have improved in terms of construction equipment segment as compared to last year.

  • Is the demand in cranes seen across India or it is from some specific regions?
    o Demand if across the country . For the first time demand has been seen in Jammu and Kashmir and north region

  • Metal prices have increased in the recent past. Secondly, for the end user, crude price is important part of his overall cost structure, which has also increased. Does company is completely inelastic to these kinds of pressures which may happen for the end user to buy equipment
    o Generally the increase in prices will be in term of 3-5 %. Company do a soft release of prices into the market and generally it is done into two steps. There can be a lag sometime of one or two months where company is trying to push the price . but there is no reason to worry because once the demand is high, price increase should not be difficult. It is generally when the demand is on the weaker side, pushing price increase is more difficult.

  • Management Comments
    o “Going forward company is looking at 25 % growth with about anywhere between 11% to 13% EBITDA levels and with a 9% - 10% PBT levels looks achievable. Company is working hard in that direction and trying to control company in all the right senses whether it is working capital, our inventory, creditors or debtors or product portfolio , product line and infrastructure in the market to support equipment. “

		Action Construction Equipment Ltd

Q4 fy 18 concall highlights
Financial Performance

  • Q4FY18
    o Revenue grew by 60 % compare to last year same quarter
    o PBT grew by 800 % compare to last year same quarter
    o PAT grew by 921 % compare to last year same quarter
  • FY18
    o Revenue grew by 45 % compare to last year
    o PBT grew by 79 % compare to last year
    o PAT increase by 264 % compare to last year
    o Company will reduce and retire whole Debt in next 8-9 month
  • Segment wise Growth YOY
    o Crane segment grew by 51 % compare to last year
    o Substantial equipment grew by 47 % compare to last year
    o Material handling grew by 53 % compare to last year
    o Agri-equipment grew by 21 % compare to last year
  • Key Highlights
    o Order flow increase by 30-40 % compare to last year
    o ROCE will stand at 28-29 % and ROE will stand at 20 % in coming year
    o In FY19 there will be 30-35 % growth in top line
    o Expand margin to about 11 % at EBITDA level, 8-9 % at PBT level , 6 % at PAT level

Q&A

  • Kindly share volumes segment wise for Cranes ?
    o Volumes of Cranes sold during the year
     Pick and Carry Cranes – 50,000 units
     Forklift Cranes – 934 units
     Agri Tractors – 3520 units
     Tower Cranes – 147 units
     Wide tower Cranes – 78 units
  • What would be the market growth in Pick and Carry Cranes , Forklift Cranes and Tower Cranes ?
    o Overall 51 % increase in Market share of Crane business
    o 53 % market grew in Forklift Cranes
    o 20 % market grew in Tower Cranes
  • Is there any progress in Backhoe loader orders?
    o Orders grew by 47 % compare to last year
    o In current year demand will increase more then 70-80 %
  • How many Backhoe loader order was managed by company?
    o 230 Backhoe loader were completed. This portfolio grew by 80-100 % in next 4-5 years.
    o New backhoe loader are well occupied and expanded also to some countries
  • Which factor is driving so much robust growth in the Industry?
    o In Cranes, 60 % of orders come from Infrastructure and 40 % from other sectors. Growth is all across
    o On Infra side growth is coming from Road , Railway , Metro , Urban Infrastructure and cycle of steel has also evolved
  • How long will this growth sustainable?
    o It depend on GDP growth and economy expansion
    o Structural changes are done by government by focusing on Roads, Railways, PMAY (Pradhan Mantri Aawas Yojana). It will last for 2-3 years
    o Most of old equipment are now in replacement cycle
  • What is the contribution of replacement products to total revenues?
    o 7-8 % , Replacement cycle comes after 8-10 years of cranes or tractors when their life is completed
  • What had been the growth driver in material handling and forklift?
    o Revival of Industries and logistics movement
    o In Material Handling
     Market is growing and company is also expanding its market share by 2-3 % and current market share is roughly 20 % There is a big market for small material handling
    o In Forklift
     Company had introduce new product six month back to use in small warehouses and it accepted well in the market.
  • Does company rental business picking up?
    o Yes , 20 % growth was there in current year. Company is very much choosy with kind of customers working with . This business will expand faster .
    o At current level Rental business contribute 2 % to total revenue , company want to take it to 50-60 Cr from 21 Cr currently
  • What is the current capacity utilisation segment wise ?
    o Cranes – 75 %
    o Construction Equipment – 30 %
    o Material Handling – 50 %
    o Agri Machinery – 50 %
  • Is current land is enough for company to do CAPEX ?
    o Company have total 82 acre of land out which company is working on 30 acre . So to take revenue from 1500 Cr to 4000-5000 Cr there is enough land
  • How does company see market share and competition going forward ?
    o In Cranes company have 63 % market share , will expand by 3-4 % in current year
    o In Construction equipment company is very small player with presence at 100 locations
    o In Forklift company have 20 % market share
    o In Agri Tractors company is very small in size so it will take 2-3 years to get market share
  • Does company have done any tie up?
    o Yes company had done a tie up with a company in Poland. They give contract of 4000-5000 tractors which will be manufacture by using their technology . They will re-export the tractors to Africa
    o Company also get access of their technology so company can also sell same tractors in India.
    o Out of total order 25-30 % will be completed in current year and rest will be completed in FY20
    o May be company will sell 12000-13000 such tractors till FY20
  • What is the role of company subsidiary Frested Ltd ?
    o Company had established that subsidiary 7-8 years ago to acquire a company in Romania making small tractors but it doesn’t run and get shutdown. Now to wind up that whole business company is merging its subsidiary Frested Ltd.
  • How company see the government demand in Crude ?
    o History show that whenever crude increase India keep on growing.
    o 30-40 % of business depend on government in respect to Infra
    o From last 3-4 year company is trying to develop special equipment for Indian army and it is very successful from last 2-3 years .Company had supplied 50 odd cranes for a special project. Last year company had supplied 130 cranes. Also did one project with Ashok Leyland
    o In next 2-3 years the number will grow to 1000 . Impact will also shown in current year revenue
  • What was contribution of exports to total revenue?
    o 6-7 month back it was 1-2 % of total revenue and it will increase to 4-5 % and going forward it might contribute 8-10 % on revenue. 30-35 % growth will be seen in next year.
  • Kindly give more explanation on the Company in Poland ?
    o It is the oldest company in Poland and it was largest but after Second World War they vanished.
    o In 1970, they developed a technology and it became very famous. There is a very good market in South America and Africa for that tractors. But due to heavy cost that company was not able to meet their customer requirement so company decide to outsource it and Action construction get the tie up to manufacture the tractors and may components also
    o Difference in product is gearbox , capability , force and it require very less maintenance so it have a very long life
  • Is there any gross margin expansion going forward ?
    o It will come from operating leverage
    o Company is suffering from prices side steel prices have gone up so much . Once it push 2-3 % down then company will do further margin expansion
    o In construction equipment margin has increase from 4 % to 8 % and it will go to 12 % by end of current year
    o In tractor also margin has increase from 2.6 % to 6 % further it will reach 8-10 % by end of current year
  • Is there any waiting period in any product ?
    o In Cranes it depend on model it can take 1 week or even 2 months
  • What is company planning to do to gain market share in forklift and construction equipment ?
    o Godrej and Voltas are the most aggressive players in the market . Company is working on expanding service support to gain market share
    o In construction equipment it had been revive in last 1-1.5 years and company is fully focused to grow 70-80 % in a year
    o In motor grader main competitors are Cater Pillar , Lebay , Lubog
    o Backhoe Loader competitor are KS Construction , Tata , Mahindra Market size is 40,000 units
    o In cranes main competitors are Escorts , In tower cranes main competitors are Putian m Lebug and other imports
    o In others competition are KS Construction , Volvo , Cater Pillar, Escorts
  • How big will be defence order ?
    o Trial had been done . It will be 26-27 units which will supplied first then is required then send 300 units in FY20 ?
  • Is there lot of pressure of raw material on Balance sheet ?
    o There is still pressure in balance sheet and it will release in current quarter
  • What margins are there in rent business ?
    o About 60-65 % margins at EBITDA level , 25-30 % at PAT level
  • Kindly give growth guidance for next year ?
    o On conservative side at least grow 30-35 % at Top line , 11 % at EBITDA level , 8-9 % at PBT level , 6 % at PAT margin
  • What about order flow going forward ?
    o It will increase more then 40-50 % YOY
    o Company 60 % of revenue come in second half and 40 % in first half
  • What is the capacity of Industry to match with requirement of 40,000 units of requirement of Backhoe loader ?
    o It was 20,000-25,000 units in past . This year it would be 40,000 units
    o Most of industry players have capacity to do it and JCB has also expanded its capacity in Rajasthan . Current capacity of company is 1200 units and in some time it can go to 1500-1600 units
    o Capacity crunch is with component manufacturers but all are going for capacity addition
  • Where will be the pricing increase ?
    o Tractors
  • How does company see shift in term of timeline by customers ?
    o Timeline are becoming short specially from Infrastructure side and big customer . Payment are secured by Bank finance . Company give direct credit to one company . Else it is like cash and carry model only where it take 15 days by bank to get the payment . Working capital and cash flow remain in control
  • If there any waiting period ?
    o It is there a wee or month depend upon model.
    o Company is moving toward GFA(Guaranteed For Availability) in which customer will get the order in 3 days after payment and it will be applicable for all products
  • Any changes at organisation level ?
    o Company had appointed ENY as internal auditors
  • Does company have any threat from UBER of construction machine ?
    o No they have to buy machine from company only .
    o The companies which have big projects will take out the cost of cranes in 2-3 year so they buy it instead to take on rent
    o Only companies which have work for less then 6 month take cranes on rent
  • Elaborate on locations where company operate ?
    o Company operate at 100 locations out of which at 23 location company have own office and balance are sales & dealers point .
    o Company is present at every state at multiple locations . Going to expand in Jammu and Kashmir and North-East region because lot of developing going on there
  • How much would be direct sales and how much would be from dealer network ?
    o 30 % of business comes from direct sales and 70 % from dealer network
    o There are two types of dealers
     Stock and sale in which construction equipment and machines are stock there , they buy from company and sale to local customers . That type of dealers are at 7-8 locations in Rajasthan, Kerala , Ranchi , Bangalore,
     Other dealers take order and it get shipped directly from company and part of it go as commission
  • Why company have huge 170 Cr of receivable if company is using a cash and carry model ?
    o 7-8 % of debt from dealers
    o There was high sale in last quarter so receivable stand there of 41 days
    o 10-20 % of business come from corporate where 30-35 days credit is given but they take it to 60-90 days
    o It take 15-20 days average from NBFC company is doing it fast by taking it to RTGS
    o Bank Finance also take 30 days
    o In Export also it take 30-90 days in process to get revenue
  • How much company spend on R&D ?
    o Currently 70 people are working in R&D and invested 10 Cr in last year . Company spend 1 % of revenue on R&D
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Action Construction Ltd
Highlights of Q1 FY19 results
Financials

  • Revenue grew by 78 % to 336 Cr compare to last year same quarter
  • PBT grew by 391 % to 23.12 Cr compare to last year same quarter
  • PAT grew by 342 % to 16.65 Cr compare to last year same quarter
  • Export Revenue increase to about 5 % and company will take to 7-8 % by end of FY19
    Key Highlights
  • Generally second half contribute 55-60 % of revenue and increase margins
  • Company will be able to grow in access of 35 % in FY19 top line with margin expansion.
  • Margins will be standing in double digit going forward in second half of FY19
  • Companies had done very well in all segment
    Q&A
  • Did company had gain market share expansion in Cranes ?
    o Yes around half a percent , More or less it grow in a similar phase.
  • Is there any new driver which has given such kind of growth for the Cranes segment of company ?
    o There are two three drivers
     Out of total Cranes that company makes about 60 % go directly indirectly in Infrastructure construction activity and balance 40-45 % are utilized for engineering activity for industrial use including logistics . So every segment get stabilize and going toward north from current market so demand is also looking up
     In the last two years there were many pent up demands which is also released
     Some portion also attribute to the replacement market which add up to pent up demand only. Because of economy upturn in place old machinery written over by new machine
     Main driver is the economy activity is on the pick up . So there is more movements of placing shifting of all elements so for that cranes requires.
    o Related to Cranes forklift activity is also increasing and seeing growth in revenue in that segment which is hardcore for inside the factory for small palette road . So the activity is on the increasing trend.
  • What is the capacity utilization across all segments ?
    o Segment Wise Capacity Utilsation
     Cranes- 75 %
     Construction Equipment – 30-35 %
     Material handling and Forklift – 50-55 %
     Agri- 50 %
    o Company has started to extend cranes capacity with a small CAPEX which will happen in two phases where company is spending totaling to about 20 to 25 Cr. By October November company will get the first phase ready where company will be able to increase capacity utilisation by about 40-50 % and in revenue terms maybe around 500 Cr capacity addition so that will be in place by Oct-November.
    o In other segments company have capacity available which was expanded in FY12. Which remain utilized so within this year or going forward company will be able to use these capacities also.
  • What explains the QOQ drop in EBITDA margin to about 8 % and what explains the confidence that company will have double digit margin in FY19 ?
    o Company margin has slow down to 2.5 % to 11.1 % to 8.7 % but if you also look at company margins on YOY basis they have expanded from 6.1 % to 8.7 %. Second half of company business will contribute 55-60 % of revenue so margins will increase because of increase in revenue so that give confidence to company to grow in double digit.
    o Biggest factor that reduce margin is primarily steel because steel prices has gone up by 30-35 % which has led to drastic price increase for company in input cost. Company was offset of the price increase which was done in Q1 of last quarter and in around may June in Q1. There is still 2-3 % price increase which is pending will get push in second quarter. So that will help company to normal margins .
    o Steel prices has started to cool off in last week in the long product they has already gone down by 5 % and So going forward company be pulling of 8-9 % of prices in over 2 or 2.5 months if that happens than company might do better than 11 % on a whole year basis.
  • What is the progress on backhoe loader and business of tractors ?
    o Backhoe loader company is started doing very well and number are increasing and company is confident to expand that portfolio to around 70=80 % on whole year basis along with company road machinery business.
    o In Agriculture tractor side company is looking for a 20-25 % increase in volumes. Already done better in Q1 on YOY basis and accordingly the margins will also improve going forward this year itself.
  • What would be the indicative Volume number for the product line in FY19 ?
    o Q1 Volumes
     Cranes – 1639 compare to 950 last year same quarter
     Mobile tower cranes – 19 compare to 14 last year same quarter
     Fix Tower Cranes - 46 compare to 26 last year same quarter
     Roller Cranes – 8 compare to 1 last year same quarter
     Tractor – 1008 compare to 415 last year same quarter
     Backhoe Loader- 63 compare to 38 last year same quarter
     Forklift - 253 compare to 188 last year same quarter
     Soil Compactors -50 compare to 20 last year same quarter
     Motor Graders – 13 compare to 3 last year same quarter
     Truck Cranes – 4 compare to 3 last year same quarter
     Rotovaiters -342 compare to 131 last year same quarter
    o Indicative number for the whole year
     Cranes – 35 % increase
     Construction Equipment and Backhoe loader – 70-80 % increase
     Material handling Forklift – 40-45 % increase
     For agri machinery – 20-25 % increase
  • What are the steps taken by company to increase exports further ? From which geographical area growth is coming in terms of tractors going ahead in terms of export market ?
    o In second half of last year company had started doing concept presence on ports in middle east and south America and by the end of year exports will contribute 7-8 % by the end of the year.
    o Main area focused by companies are Africa , Continental South America, Middle east countries and some SAARC countries and some Asian countries as well.
  • What about back hoe loader expansion compare to peers ?
    o Company has just started pushing it from last 1.5 year so in coming 3-4 years company unit will increase to 7000-8000 and it will pick up going forward .
  • How is company contribution toward Indian Army and Military to the products which they use in Make In India concept ?
    o From last 3-4 years company is working very closely with the Indian defense and the machinery they require is different from a normal one and there are 4-5 different applications for 4-5 types of machines and company has already got products approved and cleared . Last year company get reasonable order in material handling equipment . Ashok Leyland and company is jointly making fusion of a machine for test and trials. Now about 4-5 different types of machines has been approved by army in the last 2-3 years for applications. Numbers are also good of machineries. So hopefully this will continue to give some meaningful business from this year onwards .
  • Where company see more demand in Real estate or in public Infrastructure ?
    

o In past real estate Tower cranes demand were contributing 10 % in total revenue out of total 60 % of Infrastructure 10 % was real estate demand which has dried up in that last 3-4 years . Going forward Infrastructure will be much bigger than real estate for most of everybody but in real estate the housing side over the next 3-4-5 year is should boom because of the government focus apart from that apart from that there are genuine users and buyers so with respect to that everything is on increase. So there will be good increase in real estate side of business but Infrastructure would be much bigger. Manufacturing is also going to be boom and that contribute about 40 % .
o So from 100 % revenue 10 % come from Real Estate , 35-40 % comes from manufacturing and Industry , Balance 50-55 % comes from Infrastructure

  • Is there any competitive pressure in reduction of EBITDA margin QOQ ?
    o Yes , in the last two times when company increase the prices then competitors follow with a lag of three week or four week but in last weak competition has taken than lead increase the prices before company increase it so it will become very easy to push up price in next 3-4 weeks
  • What is the net working capital days for FY19 ?
    o About 25 days because company have inventory of 60 days and creditors of 75 days. In the last quarter company had reduce the inventory days from 68 days to 60 days. So company is trying to manage inventory and debtors in very efficient manner.
    o Apart from that company is also implementing new supply management software and it has just become operational in current month . Going forward company will reduce inventory further in next 2-3 months
  • Who is the exact competitor for the company and what is the difference between company and nearest competitor ?
    o In Mobile Cranes and Pick and carry Cranes the market is divided between Escorts and company . Company is doing of over 62-63 % and balance is done by Escorts . There are 3-4 unorganized players in smaller pace but they are doing very insignificant numbers With increase in capacity utilization company may take the market share to 66-67 % this year
  • How to look at the all other expenses ?
    o On YOY basis
     Manufacturing expenses gone down by 1 %
     Employee expense gone down by 2.7-2.8%
     Selling and distribution expense also gone down by 0.6 %
    o As revenue go up then the variable expense will gone up in line .
    o 60 % of Other expense if fixed and 40 % is balance in nature.
  • What should be the full year tax rate assumption ?
    o 27 %
    o There are two benefit which company getting one is R&D where company get additional 50 % rebate , In other income company had done certain investment in the fix maturity plans of the mutual funds which are more or less tax free income so by adding these two numbers company must be around 27 %
  • What will be the scenario of pricing in increase and decrease price of steels ?
    o If steel price increases than the pricing will increase and pass on to the customers
    o If steel price decrease then company done cut the prices and pass on to the customers
    o Decreasing happen only in a supply demand scenario where supply is more than demand but today it is opposite so practically there is no need to reduce the prices.
  • Kindly share company market share in different segments ?
    o Pick and carry crane – 63 % plus
    o Mobile tower cranes – 85-90 %
    o Fix tower cranes – 60 %
    o Crawler Cranes up to 75 tons – 30-35 %
    o Tractors and Back hoe loaders- Miniscule
    o Forklift 20-22 %
  • Kindly elaborate on capacity expansion in Cranes ?
    o There would be expense of 23-24 Cr in which there are two phases
     Expanding fabrication capacity that could be in place by October and November.
     Modernizing and building new paint shop to cater to the pre-painted requirement of the mobile cranes.
  • Any update in Urshos agreement ?
    o Still in process company will announce in 2-3 months.
  • What is the scope for tractors because rural economy is picking up ?
    o Last year company had done about 3500 tractors and this year may be close to 5000 tractors so increasing it to about 20-30 % will easy or even more than that and taking it to about 15-20,000 numbers in the next 3-4 year and company is expanding in all geography.
  • How does company see growth post FY19 ?
    o There is tremendous scope in every segment to grow and expand . Current government is proactive . Whenever BJP government has came in 2002 , from 2002 to 2007 company was able to grew at 70 % CAGR on a smaller base.
    o Growth Prospect
     Now the metro which government is going to build of which work has been started between Ahmedabad and Bombay this is itself a mega project which will consume a lot of machinery and cement and steel alongside. Then further it will extend to Pune , Bangalore Chennai , Hyderabad ,Kolkata , etc.
     Renovation of railway station and new railway line and dedicated railway corridor the new eastern and western
     Road sector the purvanchal express way , Nagpur and Bharatmala and Diamond Quadrilateral
    o So this government build business and if BJP comes in power again then company will have another 5 year to grew 35-40 %.
    o In construction equipment segment and tractors in next 2-3 years it will become of a reasonable size . That can help company to sustain growth momentum.
    o Company business if of cyclical nature so to undo that company started focusing on Exports. This year company is targeting at least 7-8 % revenue should come from exports and going forward try to take it up to 15-20 %.
    o In defense business can also provide the 5-10 % of revenue going forward.
    o So all together in cyclical nature business also company will have 20-30 % growth momentum with them.
  • What is the life of a forklift and Cranes ?
    o 7-8 years for forklift
    o 10-12 years for cranes
    o Crawler cranes would be 15-20 years
    o Tower cranes would be 15 years.
  • What is the revenue of renting a cranes and how company plan to increase it?
    o Current revenue is in tune of about 4-5 Cr and company was quite skeptical from last 2-3 years because most of these were tower cranes and company was working with real estate companies and payment was not coming on time so company is not focused on increasing the fleet size there . But definitely there would be 20-30 % growth in revenue of this segment.
  • Is there any fund raising plans ?
    o No company is able to generate that much cash to support the growth rather than that company is planning to take out the short-term and long-term debt.
  • What is happening in the share buy and sell because promoters had buys share and sells equally ?
    o No selling was done in December to increase liquidity for form key investors to take stake. Price was fall very low so promoters and had buy the shares in last month.
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Promoter buying here.

Security Code Security Name Name of Person Category of Person * Securities held pre Transaction Securities Acquired / Disposed Securities held post Transaction Period ## Mode of Acquisition # Trading in Derivatives Reported to Exchange
Type of Securities ** Number Value Transaction Type Type of Contract Buy Value (Units~) Sale Value (Units~)
532762 ACTION CONSTRUCTION EQUIPMENT LTD. Mona Agarwal Promoter 25339407 (21.60) Equity Shares 5,00,000 42035389.00 Acquisition 25839407 (22.02) 28/01/2019 28/01/2019 Market Purchase 30/01/2019
532762 ACTION CONSTRUCTION EQUIPMENT LTD. Sorab Agarwal Promoter 7148650 (6.09) Equity Shares 4,75,000 39938195.00 Acquisition 7623650 (6.50) 28/01/2019 28/01/2019 Market Purchase 29/01/2019

ACE Ltd

Highlights of Q3FY19 and Nine Month FY19 Results

Financials

  • Q3FY19
    • Revenue grew by 30 % to 3626 Cr from 2790 Cr last year same quarter
    • EBITDA margin in Q3 is 7.9 % against 7.2 % in Q2 last year same quarter
    • PBT and PAT margins increase by 0.6 % and 0.7 % accordingly compare to last year same quarter
  • Nine Month FY19
    • Revenue grew by 45 % YOY to 1043 Cr which is similar to last year.
    • PBT grew by 58 % compare to last year same period
    • PAT grew by 41 % compare to last year same period

Key Highlights

  • Margins remain under pressure primarily due to steel and raw material cost but company likely to manage its margin on QOQ basis.
  • From 1st January 2019 company had done a price increase of 4 % across all models and there has also been little contraction on steel prices which will help company in reducing its raw material cost by about1-2 % so in current quarter and going forward company is looking at margin expansion of at least 3-4 %.
  • Export started contributing 6 % in revenue and target is to take it to 15-20 % in next 2-3 years and next year company is targeting about 10 %.
  • In Q3 company has introduced new crane models which are very new to the industry and they are multi activity Cranes and company already have necessary patent pending for the same. Company see significant margin expansion going forward because company is the only one to operate in such models. Company will launch one model in February and other two product in April.
  • Order book respect to Cranes and construction equipment in that generally company remain booked for about 1 and 1.5 month and today company is standing at 25 days. ‘
  • Company have started small motor-graders for small roads and villages.
  • Current Capacity Utilization
    • In Cranes 80 %
    • In Construction equipment 40-50 %
    • In material handling i 60 %.
    • In Agri 60 %

Outlook

  • In next 2-3 years company will grew 15-20 % in pick and carry market.
  • Company will be able to close the year with topline growth of 30 % plus and EBITDA margin in excess of 8 %
  • Actual impact of steel prices going up was 12 % and with this current margin expansion and 1-2 % in RMC so now the pass on is done so margin will expand by 3-4 % at least.
  • Tractors will grow and contribute about 225-230 Cr in revenue for full year. With other products company will be able to grow by 10-15 %.
  • In next year company will be able to grow agri business by 25-30 %
  • Company will launch 50-60 tons and 70-80 tons truck crane and company will be very price competitive and to capture 50-60 % market share in 1-2 years will be easy for company because there is lot of truck in market with respect to company Cranes.
  • Company is in processing of constructing one more office in Gurgaon
  • Going forward Truck Cranes will be 15-20 % margin product for the company.
  • In agri-equipment company will do more than 4500 tractors and in next year company will try to do more than 6500 tractors 25-30 % more. So company aim is to building the portfolio so it become significant over next 3-4 years. In next 4 years company will acquire 2-2.5 % of market share.
  • Company is doing effort to become debt free by FY20.
  • Company is launching new bigger model in Crawler Cranes one is about 120 ton and another is 150 ton in current year itself.
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https://www.bseindia.com/corporates/anndet_new.aspx?newsid=a5d88378-81e2-4f43-b57b-22799a4f789a

Company is going to consider the proposal of buy back in its 16th May 2019 meeting.

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Considering that it is a market leader in cranes for a long time, the current PE of 15 seems less. I am going to accumulate.

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What market share does ACE has. Is it limited to any region. Is there any report on its regional presence and technology collaboration?

Anyone knows why it increased 10% on Friday? I don’t see any news

I believe ACE behaves in extremes with respect to perception of the short to mid-term prospects of the economy. Hence the volatility.

After completing declared buyback successfully promoter continuously buying from open market.

Hi,

In my view Promoter buying is a good sign.And nothing is pledged.
Reduction in working capital cycle and days of inventory is a good sign and EBIDTA margins are also improving.
Significant reduction is debt.per year.and as per 2019 data the debt to equity ratio stands at 0.12.Below is the chart for debt reduction per year.

Action construction debt ratio

They are also the suppliers to major industries in INDIA like
Aarati Industries,ACC,Adani,Allcargo logistics to name a few.

But the stock price is in declining trend from March 2018.Fellow VPs So what market knows which I dont?

Tracking the stock for investment purpose.

Thanks,
Deb

ACE Investor Presentation.pdf (4.4 MB)

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Backhoe loader “PhanTom 4×4” launched. Which has lot of scope.

a7ff5341-fda8-4f88-bdaf-4b1ade684fd8 (1).pdf (470.4 KB)

Mgmt interview on BloombergQuint. March quarter expected to be good and says that co. has ebita has improved from 8-9% to 11-12% already.

Disc.- invested

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ACE FY21.pdf (4.8 MB)

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Excellent Result Posted

Plans to Raise Fund - expecting growth in business

Discl: Invested from a low level

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The reason for todays move in the stock price

Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, we wish to inform that in continuation of our efforts
to expand business in the Defence Sector, Action Construction Equipment Limited (“the
Company”) has been declared L1 for supply of 482 numbers Multi-Purpose Tractors
(MPT 4X4) along with special attachments from Directorate General of Capability
Development, Ministry of Defence (Army).

The Said Multi-Purpose Tractors are powered by minimum 72hp engine with 4X4
configuration and equipped with proven aggregates integrated by latest technology.
These special purpose tractors demonstrate our efforts under the “Make in India” and
“AatmaNirbhar Bharat” initiatives of the Government.

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